China Energy Corp (OTC BB:CHGY)

CHINA ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

See notes to the consolidated financial statements.

GeoTeam caluculated non-gaap EPS of $0.13 vs $0.10 in prior year quarter. Adjusting for $1.3 million government subsidy.

Fourth quarter Highlights:

• Revenue increased 49% year-over-year to $8.7 million due to higher selling prices, increased unit sales of Tianli market hogs plus retail sales of "Tianli An Puluo" hog meat.
• The retail division contributed $1.7 million of revenues in its second quarter of operations for the year.

Tianli's Chairwoman and CEO, Ms. Hanying Li, began, "We completed another successful year, which included the acquisition of our 11^th hog farm and the launch of our Tianli-branded retail pork products through our partnership with An Puluo Foods. While our fourth quarter results were negatively impacted by complications resulting from contaminated feed at a few of our farms, we responded quickly to contain the impact. Having implemented a series of additional safeguards, we expect the negative drag on our financials to subside in the first half of 2012."

"Our company is executing on the vision I had when we launched Tianli eight years ago," Ms. Li concluded. "The strong demand for pork in China is providing us with a tailwind to grow organically as our more recent farm acquisitions reach capacity. The retail expansion provides us with further opportunities to increase revenues and cash flows while establishing the Tianli brand through AnPuluo Foods. Our single most exciting strategy for 2012, Enshi Black Hog breeding and sales, is expected to be a major contributor in revenues and earnings for years to come"

For the three months ended February 28, 2011, revenues for Coal Group were $16,256,425 compared to $16,247,966 in the comparable three months in 2010. The $8,459 increase was mainly due to the increase in the volume of proprietary trading of coal by 13% over last year. However, this increase was mitigated by the decrease of volume of coal produced and sold at our Laiyegou coal mine by 15%.

Coal Group produced approximately 132,383 metric tons of coal during the three months ended February 28, 2011, compared to 156,187 metric tons in the comparable three months in 2010. Volume of coal sold by our proprietary trading business was approximately 192,266 metric tons during the three months ended February 28, 2011, compared to 169,710 metric tons in the comparable three months in 2010. The decrease in coal production volume in the first quarter was mainly due to the temporary closure of the mine to allow the local government to perform a safety check and equipment maintenance. This scheduled inspection was due to a recently enacted law local government, and it will occur every year. We currently anticipate that the annual production volume for fiscal year ending November 30, 2011 will be on par with last year.

• Full year 2010 vs 2009: $0.27 vs. $0.07
• Fourth quarter 2010 vs. 2009:  $0.06 vs. $0.08

2010 Third Quarter Highlights:

Coal Group

• Revenues for Coal Group were $17,200,132 compared to $9,217,895 in the comparable three months in 2009.

"The $7,982,237 increase was due to the fact that the production at LaiYeGou coal mine was partially shut down for the installation of the long wall automatic mining equipments and normal production resumed in mid July 2009 with the completion of the installation and adjustment of the equipment and increases in the selling price of coal in the 2010 period.

In addition, the increase of the volume of proprietary trading of coal also contributed to the increase of revenue from Coal Group as compared to the prior comparable quarter in 2009."

Heat Transfer Group

• Revenues for Heat Power were $3,952,128 compared to $744,725 in the comparable three months in 2009.

Consolidated results

• Revenues rose to   $21.2 million from $10.0 million.
• Net income rose to $4.3 million from a loss.
• EPS increased to  $0.10  from  a loss of $(0.01).

"Due to our expanded production capacity and the efficiency of our long wall mining equipment, we expect revenue from coal production to remain robust, and expect incremental growth from our proprietary coal trading operation as we have been granted additional quota for space on trains from the local railway bureau," stated WenXiang Ding, chief executive officer and president. "Additionally, our momentum, financial strength, existing infrastructure, and proximity to additional coal resources in the region position the Company for expansion through potential acquisitions. We also expect the continued development of the XueJiaWan district to fuel growth in our Heat Power segment."

The Company is reaffirming its previously reported fiscal year guidance, and anticipates reporting between $17 million and $18 million in net income for its fiscal year ending November 30, 2010. The midpoint of this range represents an increase of 243% from fiscal year 2009.

GeoTeam® Note:

In the 2010 third quarter, CHGY received one-off government subsidies of $3,333,539 (included in revenues) in connection with providing heating at the reduced rates set by the government to ensure that the local residents can afford to make the payments.

Adjusting  2010 third quarter EPS for this item would be minimal, as the Heat Transfer Group contributes very little to the bottom line.

HOHHOT CITY, China, June 23 /PRNewswire-Asia-FirstCall/ -- China Energy Corporation a leading Inner Mongolia producer and processor of raw coal for domestic heating, electrical generation, and coking purposes for steel production in the People's Republic of China, with operations in coal trading and heat and power supply, today announced that it anticipates reporting between $17 million and $18 million in net income for its fiscal year ending November 30, 2010. This would represent at least a 233% increase in net income as compared to the 2009 fiscal year.

Management anticipates sales of its Coal Group, which includes coal mining and sales as well as coal trading, will represent approximately 80% to 90% of revenues during 2010. The Company expects to produce an aggregate of approximately 800,000 metric tons of coal for the fiscal year ending November 30, 2010. China Energy produced approximately 156,000 metric tons of coal in the first quarter of 2010 with an average sales price of $37 per ton. In May 2010, the average sales price for coal was $43 per ton. The Company also expects higher level of sales in fiscal year 2010 from the Heat Power group due to an increase in coverage area of the Company's heating operations and an increase in the volume of electricity sold by its electric power operations. The Company's guidance does not include any contribution from future acquisitions by the Company. Management will continue to evaluate its business outlook as necessary and communicate any changes on a quarterly basis or when appropriate.

"We continue to capitalize on the efficiency of our longwall mining equipment which is now fully integrated at our LaiYeGou coal mine," stated WenXiang Ding, chief executive officer and president. "We expect incremental growth in China Energy's revenue and net income through fiscal year 2010 due to our expanded production capacity of approximately 800,000 metric tons per year at our LaiYeGou coal mine and growing demand for coal used in power generation, manufacturing and heating in China. We are also well positioned to expand our production and distribution capabilities through potential acquisition opportunities leveraging the rich coal resources in Inner Mongolia."